Reverse Supply Chain Improvement Project
Building a Future State: Recommendations for Improvement
Developed by
Today’s Topics
 Top-level summary of the project
 General Recommendations
 Selected Case Studies
 Overview of 2011 Work Groups
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Project Goals
 Develop recommendations for improving the reverse
supply chain that include distribution, business and
financial practices.
 Develop recommendations for increasing the
likelihood that retailers, wholesalers, manufacturers
and service providers will implement the
improvement recommendations.
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Project Concept
58 companies participated in this project.
Phase 1: Defining Current
State (Fact-Finding)
Perspectives & Practices Survey
49 companies
34 companies
20 companies
25 companies
Data
Survey
Policy
Survey
12 companies
Case Studies &
Incentives
Interviews
Senior
Executive
Summit
18 companies
1/12/11
Phase 2: Building a Future State
Recommendations & Communications
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Project Concept - 2011
RSC Implementation Work Groups
Mfr Disco
Rtl/Whlr
Disco
Recalls
Damaged
Expired
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Industry Report Contents
 Executive Summary
Industry conditions & major issues
 Perspectives & Practices Survey
Qualitative findings & conclusions
 Data Survey
Quantitative information
 Policy Survey
“Snapshot” of damaged & expired policies
 Incentives & Efficiencies Interviews
Opinions & ideas for improvement
 “Best Practice” Case Studies
Real world successes in reducing costs
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Motivation for this effort
Is current product reclamation system at risk?
71% Retailers/wholesalers said Yes (n =21)
65% Manufacturers said Yes (n = 20)
86% Service providers said Yes (n = 7)
Why?
Cost recovery issues
Store-level disposition option; other options coming?
Lack of cost ownership/sharing (manufacturers)
Declining efficiency and management role of reclamation centers if more
ARPs (manufacturers and service providers)
Why not?
No other option; unsaleables happen; viable business
Recalls are efficient (retailers/wholesalers)
Costs can be recovered with salvage sales (manufacturers)
Source: Perspectives & Practices Survey
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The Big Opportunity
Re-define “shared responsibility” – in a way that is acceptable
to all stakeholders – through actions vs words
Current general manufacturer perspective:
Each trading partner should pay for what they cause to be in
the reverse supply chain
Current general retailer/wholesaler perspective:
Each trading partner should pay for some portion of the
complete range of costs of the reverse supply chain
Source: Executive Summary
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Senior Executive Roundtable Summit on Reverse Supply Chain Improvement
Chicago, Illinois - January 12, 2011
Attendees – In Person and via Conference Call
Joe Sheridan, Co-Chair
Wakefern Food Corporation
Michael Graham, Ted Lechner
HEB Grocery Company, LP
Wilson Lester, Neil Meischeid
Rite Aid
Frank Tataseo, Co-Chair
The Clorox Company
Jeff Pepperworth, Mike Umbach
Inmar Inc.
Neville Fenton, Steve Henig
Wakefern Food Corporation
Chris Michael, Bob Rippley
Associated Wholesalers, Inc.
Dave Jones, Gary Piwko, Kim Tyler
Kellogg Company
Becky Bly, Pat Fisher, Desiree Paoli
Walgreens
Don LaChance, Michael Papaleo
C & S Wholesale Grocers
Joe Scaccia, Regenia Stein
Kraft Foods, Inc.
Gary Regina
Winn-Dixie
Carmen Chavez, Bob Richardson
The Clorox Company
Oscar Fussenegger
Kroger
Gene Bodenheimer
GENCO Damage Research
Rob Davis, Ron Schone
Pfizer Consumer Healthcare
Mark Wilhite, David Wurm
General Mills, Inc.
James Flannery, Beverly Grant, Brian Kirkpatrick
The Procter & Gamble Company
FMI Staff
Pat Walsh
Facilators
Dan Raftery
Raftery Resource Network
NACDS Staff
Steve Perlowski
GMA Staff
Denny Belcastro, Logan Kastner, Brian Lynch
Thomas Ferguson
Kelly Drye & Warren
Steven B. Baumberger, Michael A. Gorshe
Accenture
Christopher Fink, CMC
RetailGrowth
Donna Jean D. Simon
Quest International, LLC
Judy Kehoe
Kehoe Consulting International LLC
Carol E. Sommer
Sommer Solutions
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Roundtable Summit Recommendations
Executive Roundtable Summit participants developed several
general and specific recommendations that apply to each of the
five conditions:
 Damaged goods
 Expired products
 Manufacturer discontinued items
 Retailer/wholesaler discontinued items
 Product recalls
Some recommendations are appropriate for individual
companies, some for trading partners working together and
other for the industry at large.
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Definitions
 Damaged Products – Compromised packaging, e.g., crushed,
dented, punctured, unglued, etc.
 Expired Products – Date printed on the package has passed.
 Manufacturer Discontinued Products – Manufacturer has
decided to stop producing and/or selling.
 Retailer/Wholesaler Discontinued – Retailer or wholesaler
has decided to stop buying and merchandising.
 Recalled Products – Manufacturer issues instructions to
remove specified inventory from distribution.
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General Recommendation
1. Keep the five topics separate
Internal and trading partner discussions will be more productive.
 Across the five topics, issues and opportunities vary by
company, by product category and often by brand.
 The current level of industry discord on the combined subject
of unsaleables is driven, in part, by these variations.
 By focusing on the conditions individually, companies can be
more successful in identifying and making improvements.
Example: Damage goods have been a focus for several companies,
with positive results.
Next opportunity: Expired products.
Source: Senior Executive Roundtable Summit
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General Recommendation
2. Enhance scorecards and internal performance reports
Add metrics and Key Performance Indicators (KPIs) for each
condition.
 Scorecards can be used internally among corporate
divisions and with trading partners.
 KPIs can be used in internal performance incentive
programs and in industry-level comparative assessments
such as “best-in-class” publications.
Example: Service level has become an acceptable scorecard
element and KPI.
Next opportunity: Days-of-life remaining.
Source: Senior Executive Roundtable Summit
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General Recommendation
3. Collect better data about each condition
Follow the lead of those companies that have invested in improvements in
data acquisition and management resources. Examples:
 Some retailers include reclamation system parameters in store-level
perpetual inventory systems.
 Several manufacturers collect supply chain data using service providers
that audit multiple points in the supply chain.
 Improvements that require trading partner involvement are limited by
data definitions and audit methodologies which are not consistent, i.e.,
not standardized.
Example: Lean Six Sigma organizations standardize procedures and measures
to minimize system breakdowns.
Next opportunity: Include reductions in damaged and expired products.
Source: Senior Executive Roundtable Summit
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General Recommendation
4. Exclude discontinued products and recalls from Adjustable
Rate Policy programs
ARP programs should address damaged goods and expired products to the
appropriate degree for each manufacturer and should exclude manufacturer
and retailer/wholesaler discontinued products and recalls.
 Periodic ARP reimbursement rate reviews and updates should include
data that represent actual incidents of damages and expirations for
products which have not been discontinued.
 Increased trading partner collaboration and increased data
transparency are needed to improve the accuracy of forecasts for the
expiration of active product inventory.
Example: Trading partner dialogue about “minimum customer remaining
shelf life” is increasingly involved in inventory management improvement
initiatives.
Next opportunity: Separating discontinueds from active product expirations.
Source: Senior Executive Roundtable Summit
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Specific Recommendations Ahead
Caution!
Explicit Content
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Specific Recommendations - selected
Damaged Products
1.
Develop and use a common scorecard for measuring progress and
opportunities in the reduction of damage to products, similar to servicelevel scorecards.
2.
Identify new and common data sources for individual company metrics
and industry benchmarks.
3.
Adopt a strategic commitment to focus on total supply chain process
improvement in order to realize several benefits.
Source: Senior Executive Roundtable Summit
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Specific Recommendations - selected
Expired Products
1.
Develop and use industry standards for key shelf life factors.
2.
Develop common trading partner scorecard for shelf life performance.
3.
Increase use of information technology to track remaining shelf life.
Source: Senior Executive Roundtable Summit
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Specific Recommendations - selected
Manufacturer Discontinued Products
1.
Develop a standard exit process for manufacturers and retailers to use.
Process goal: no product sent to reclamation.
2.
Develop and use a standard scorecard for discontinued item process
performance.
3.
ARP programs should exclude costs associated with manufacturer
discontinued products.
Source: Senior Executive Roundtable Summit
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Specific Recommendations - selected
Retailer/Wholesaler Discontinued
1.
Keep trading partner discussions focused on improving supply chain
efficiency and trading partner relations and protecting consumer equity
(e.g., brand for manufacturers; product and service brand for retailers).
2.
Develop a standard process for retailer/wholesaler discontinuation of
product.
3.
ARP programs should exclude costs associated with retailer/wholesaler
discontinued products.
Source: Senior Executive Roundtable Summit
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Specific Recommendations - selected
Recalled Products
1.
Manufacturer response procedures can be enhanced by having a crisis
(response) team in place and rehearsed via mock recalls.
2.
Encourage greater use of GS1-US Rapid Recall Exchange and completed
industry work (Recall Execution Effectiveness report).
3.
ARP programs should exclude costs associated with recalls.
Source: Senior Executive Roundtable Summit
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Case Studies
Category Management Focus
Shelf Life Management
Sales Potential Planograms
Demand Sales Forecasting
Increasing Available Shelf Life
New Item Exit Strategy
Succeeding with Limited Resources
Applying Sales Management Concepts
Store Focus
Engaging the Store Leaders
Six Sigma Reclamation
Supply Chain Focus
Remote Scanning of Returns
Supply Chain Improvement
Process Improvement Program
Reducing Hidden Damage
Reducing Crushed and Defective Products
Focus Reducing Defect
Trade Partner Focus
Involving Sales People to Solve Problems
Problem-Solving Collaboration
Keeping Good Product Out of Reclaim
Keeping Products Out of Landfills
Partnership Studies
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Case Study C - Retailer
Shelf Life Management
Results
 Noticeable reduction in gap between unsaleables expenses and
manufacturers’ unsaleables reimbursements.
 Higher percentage of manufactured shelf-life-remaining upon receipt.
 Fewer expired products.
Success Factors
 Provide category managers/buyers with easy-to-use reports on net product
profitability.
 Engage manufacturers through supply chain audits and meetings.
Advice
 Capture data about all unsaleable products. Avoid temptation to stop
processing SKUs covered under ARP programs
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Case Study D - Retailer
Sales Potential Planograms
Results
 Reduced unsaleables 24% in 2009. Running 14% lower in 2010.
 For some suppliers, unsaleables are 50% lower versus last year.
 Increased store profitability.
Success Factors
 Senior management vision and support to engage multiple departments.
 Increase inventory turns as key driver for reducing unsaleables.
 Regular internal communication.
 Trading partner involvement in inventory management.
Advice
 Be sure to invest adequate time, resources and capital in system changes
needed to support program.
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Case Study K - Manufacturer
Partnership Studies
Results




About 20% reduction in unsaleables costs and damages.
Improved handling practices and packaging.
Stronger relations between customers and company teams.
Reduced or eliminated ARP “gap” with several customers.
Success Factors
 Long-term commitment in time, resources and financial support.
 Full cooperation, follow-up actions by both partners for improvements.
Advice
 Anticipate personnel transition/attrition, especially in Supply Chain and Sales
divisions – protect intellectual capital, preserve momentum.
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Case Study M - Manufacturer
Increasing Available Shelf Life
Results
 Lower inventory days-of-supply on-hand.
 Reduced quantity of expired products.
Success Factors
 Involvement of service provider to collect data not otherwise available.
Advice
 Measurable results will not be noticed immediately, but will as internal
inventory controls are improved over time.
 Raise visibility of this improvement initiative above simply reducing
unsaleable expenses.
 Involve quality control and supply chain early in the research.
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Learnings from Case Studies
1. Top reasons for success at companies with history:
 Adequate investment in resources and data.
 C-level support, endorsement and sponsorship.
 Long-term, process-improvement philosophy and
approach.
 Widespread, retained and applied knowledge about
risks, rewards and processes.
 Trading partner involvement and collaboration.
2. Most common incentive for starting unsaleables initiative –
“crossing the pain tolerance threshold.”
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Learnings from Case Studies (cont’d)
3. No consistency across companies regarding which department
manages initiatives. However:
 Retailers and wholesalers have made – or will make –
stores financially accountable for unsaleables.
 Manufacturers have made – or will soon make – specific
departments financially accountable.
4. All use performance benchmarks – data about unsaleables or
supply chain product conditions combined with sales or
shipments.
5. Most have at least 2 FTEs for unsaleables management.
Several manufacturers also contract with outside service
providers.
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RSCI Implementation Work Groups
54 people
Alberto-Culver Company
Associated Wholesalers, Inc.
Bozzuto’s, Inc.
C&S Wholesale Grocers, Inc.
Campbell Soup Company
Church & Dwight Co., Inc.
The Clorox Company
Coca-Cola North America
ConAgra Foods
Del Monte Foods Company
Delhaize America
DRS Product Returns LLC
Energizer Personal Care
Feeding America
41 companies
GENCO ATC
General Mills, Inc.
Harris Teeter, Inc.
HEB Grocery Company
Heinz North America
Inmar
Kellogg Company
Kraft Foods, Inc.
The Kroger Company
Land O’Lakes, Inc.
Mars Chocolate North
America
Nash Finch Company, Inc.
Nestle Purina PetCare Co
Nestle USA, Inc.
Pfizer Consumer Healthcare
Pharmavite, LLC
The Procter & Gamble Co.
Rite Aid Corp.
S.C. Johnson & Son, Inc.
Spartan Stores, Inc.
Stericycle Pharmaceutical
Services
Strategic Solutions, Inc.
Unilever US
Wakefern Food Corp.
Walgreen Company
Welch Foods, Inc.
Winn-Dixie Stores, Inc.
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Applying Improvement Recommendations
RSCI Implementation Work Groups
Mfr Disco
Recommendations for improving decision process
transparency and resolving lead time issues
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Applying Improvement Recommendations
RSC Implementation Work Groups
Mfr Disco
Recommendations for improving decision process
transparency and resolving lead time issues
Rtl/Whlr
Disco
Recommendations for cleaning out inventory
& getting stores to sell vs reclaim
31
Applying Improvement Recommendations
RSC Implementation Work Groups
Mfr Disco
Recommendations for improving decision process
transparency and resolving lead time issues
Rtl/Whlr
Disco
How to “Do It Once,
Right & Fast”
Recommendations for cleaning out inventory
& getting stores to sell vs reclaim
Recalls
Bonus: Boilerplate communications templates
32
Applying Improvement Recommendations
RSC Implementation Work Groups
Mfr Disco
Recommendations for improving decision process
transparency and resolving lead time issues
Rtl/Whlr
Disco
How to “Do It Once,
Right & Fast”
Recommendations for cleaning out inventory
& getting stores to sell vs reclaim
Recalls
Damage control case studies & best
practices for manufacturers & distributors
Bonus: Boilerplate communications templates
Damaged
33
Applying Improvement Recommendations
RSC Implementation Work Groups
Mfr Disco
Recommendations for improving decision process
transparency and resolving lead time issues
Rtl/Whlr
Disco
How to “Do It Once,
Right & Fast”
Recommendations for cleaning out inventory
& getting stores to sell vs reclaim
Recalls
Damage control case studies & best
practices for manufacturers & distributors
Bonus: Boilerplate communications templates
Damaged
Recommendations for dealing with hot
buttons & “Top 5 Things” scorecards
Expired
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Applying Improvement Recommendations
RSC Implementation Work Groups
Mfr Disco
Recommendations for improving decision process
transparency and resolving lead time issues
Rtl/Whlr
Disco
How to “Do It Once,
Right & Fast”
Recommendations for cleaning out inventory
& getting stores to sell vs reclaim
Recalls
Damage control case studies & best
practices for manufacturers & distributors
Bonus: Boilerplate communications templates
Wed
10:45
Wed
2:45
Damaged
Recommendations for dealing with hot
buttons & “Top 5 Things” scorecards
Thur
10:45
Expired
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Thank You
Dan Raftery
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